Once gold demonstrates that it can trade sustainably above $2000, or 20% above current levels, we believe that gold mining stocks could trade at 13%-15% of spot bullion (basis XAU). That would translate into appreciation of 60%-90% above the urrent XAU level of 160.
Investor sentiment on gold is currently extremely negative, comparable to the levels of mid-May 2012, when gold was trading approximately $100/oz below current levels.....Historically, extreme negative sentiment levels such as these have provided excellent entry points for new positions in bullion and the mining shares.
Mining stock valuations are driven by forecast gold prices, when the charts below point upwards perhaps it will be time to say everyone is in. Until then, as Pierre Lassonde said at Denver, - use spot.